Sharp interest-rate cuts during the coronavirus outbreak have driven a surge in millennial refinance activity in March, Ellie Mae reported Wednesday.
The refinance share for all millennials hit an all-time high of 38%, according to the Ellie Mae Millennial Tracker. Millennials' refi share grew 4% month over month as interest rates plummeted. The average interest rate for all 30-year loans closed by millennials fell to a four-year low, down from 3.86% to 3.66%.
"The Federal Reserve cut its target interest rate to near zero in March, causing interest rates to drop and giving savvy millennial homeowners the opportunity to refinance to more favorable rates," said Joe Tyrell, Ellie Mae chief operating officer.
Despite strong refinance activity, the average time to close for refinance loans was two days shorter, down from 38 days in February to 36 days in March. The average time to close for all loans also decreased from 41 to 39 days during the same period.
"That pattern follows a trend we've seen in our data over the last 12 months, but what's more surprising is time to close numbers decreasing despite the surge in refinance activity and the limitations lenders are facing as a result of COVID-19," Tyrrell said. "Technology is now more important than ever, and lenders investing in the solutions necessary to manage their pipelines virtually are seeing success."
More older millennials took advantage of low rates to refinance last month, with their refinance share up 5% month over month to 46%. Meanwhile, the refinance share of younger millennials dropped to 26%. The average interest rates for both groups were 3.66%.
Younger millennials also tend to take on non-conventional loan types. Of all loans closed by younger millennials in March, 27% were FHA loans compared to 16% for older millennials.
"Educating millennials on the various loan types available is a priority for lenders, and seeing younger millennials securing FHA loans is a sign that lenders are making progress on this front," Tyrrell said. "FHA loans tend to be a great option for younger borrowers as they require a smaller down payment and have more flexible credit requirements than conventional loans."